Modelling A.I. in Economics

BOH Options & Futures Prediction (Forecast)

Predictions on stock market prices are a great challenge due to the fact that it is an immensely complex, chaotic and dynamic environment. There are many studies from various areas aiming to take on that challenge and Machine Learning approaches have been the focus of many of them. There are many examples of Machine Learning algorithms been able to reach satisfactory results when doing that type of prediction. This article studies the usage of LSTM networks on that scenario, to predict future trends of stock prices based on the price history, alongside with technical analysis indicators. We evaluate Bank of Hawaii prediction models with Deductive Inference (ML) and Multiple Regression1,2,3,4 and conclude that the BOH stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold BOH stock.


Keywords: BOH, Bank of Hawaii, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. How do you pick a stock?
  2. What is the best way to predict stock prices?
  3. Stock Forecast Based On a Predictive Algorithm

BOH Target Price Prediction Modeling Methodology

Accurate prediction of stock market returns is a very challenging task due to volatile and non-linear nature of the financial stock markets. With the introduction of artificial intelligence and increased computational capabilities, programmed methods of prediction have proved to be more efficient in predicting stock prices. We consider Bank of Hawaii Stock Decision Process with Multiple Regression where A is the set of discrete actions of BOH stock holders, F is the set of discrete states, P : S × F × S → R is the transition probability distribution, R : S × F → R is the reaction function, and γ ∈ [0, 1] is a move factor for expectation.1,2,3,4


F(Multiple Regression)5,6,7= p a 1 p a 2 p 1 n p j 1 p j 2 p j n p k 1 p k 2 p k n p n 1 p n 2 p n n X R(Deductive Inference (ML)) X S(n):→ (n+6 month) R = 1 0 0 0 1 0 0 0 1

n:Time series to forecast

p:Price signals of BOH stock

j:Nash equilibria

k:Dominated move

a:Best response for target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do AC Investment Research machine learning (predictive) algorithms actually work?

BOH Stock Forecast (Buy or Sell) for (n+6 month)

Sample Set: Neural Network
Stock/Index: BOH Bank of Hawaii
Time series to forecast n: 26 Oct 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold BOH stock.

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Yellow to Green): *Technical Analysis%

Adjusted IFRS* Prediction Methods for Bank of Hawaii

  1. In applying the effective interest method, an entity identifies fees that are an integral part of the effective interest rate of a financial instrument. The description of fees for financial services may not be indicative of the nature and substance of the services provided. Fees that are an integral part of the effective interest rate of a financial instrument are treated as an adjustment to the effective interest rate, unless the financial instrument is measured at fair value, with the change in fair value being recognised in profit or loss. In those cases, the fees are recognised as revenue or expense when the instrument is initially recognised.
  2. An entity shall apply the amendments to IFRS 9 made by IFRS 17 as amended in June 2020 retrospectively in accordance with IAS 8, except as specified in paragraphs 7.2.37–7.2.42.
  3. To be eligible for designation as a hedged item, a risk component must be a separately identifiable component of the financial or the non-financial item, and the changes in the cash flows or the fair value of the item attributable to changes in that risk component must be reliably measurable.
  4. Accordingly the date of the modification shall be treated as the date of initial recognition of that financial asset when applying the impairment requirements to the modified financial asset. This typically means measuring the loss allowance at an amount equal to 12-month expected credit losses until the requirements for the recognition of lifetime expected credit losses in paragraph 5.5.3 are met. However, in some unusual circumstances following a modification that results in derecognition of the original financial asset, there may be evidence that the modified financial asset is credit-impaired at initial recognition, and thus, the financial asset should be recognised as an originated credit-impaired financial asset. This might occur, for example, in a situation in which there was a substantial modification of a distressed asset that resulted in the derecognition of the original financial asset. In such a case, it may be possible for the modification to result in a new financial asset which is credit-impaired at initial recognition.

*International Financial Reporting Standards (IFRS) are a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.

Conclusions

Bank of Hawaii assigned short-term Ba2 & long-term B2 forecasted stock rating. We evaluate the prediction models Deductive Inference (ML) with Multiple Regression1,2,3,4 and conclude that the BOH stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold BOH stock.

Financial State Forecast for BOH Bank of Hawaii Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba2B2
Operational Risk 6853
Market Risk7835
Technical Analysis8142
Fundamental Analysis7949
Risk Unsystematic3878

Prediction Confidence Score

Trust metric by Neural Network: 88 out of 100 with 798 signals.

References

  1. Künzel S, Sekhon J, Bickel P, Yu B. 2017. Meta-learners for estimating heterogeneous treatment effects using machine learning. arXiv:1706.03461 [math.ST]
  2. Hill JL. 2011. Bayesian nonparametric modeling for causal inference. J. Comput. Graph. Stat. 20:217–40
  3. E. Collins. Using Markov decision processes to optimize a nonlinear functional of the final distribution, with manufacturing applications. In Stochastic Modelling in Innovative Manufacturing, pages 30–45. Springer, 1997
  4. Lai TL, Robbins H. 1985. Asymptotically efficient adaptive allocation rules. Adv. Appl. Math. 6:4–22
  5. Y. Chow and M. Ghavamzadeh. Algorithms for CVaR optimization in MDPs. In Advances in Neural Infor- mation Processing Systems, pages 3509–3517, 2014.
  6. T. Morimura, M. Sugiyama, M. Kashima, H. Hachiya, and T. Tanaka. Nonparametric return distribution ap- proximation for reinforcement learning. In Proceedings of the 27th International Conference on Machine Learning, pages 799–806, 2010
  7. Abadir, K. M., K. Hadri E. Tzavalis (1999), "The influence of VAR dimensions on estimator biases," Econometrica, 67, 163–181.
Frequently Asked QuestionsQ: What is the prediction methodology for BOH stock?
A: BOH stock prediction methodology: We evaluate the prediction models Deductive Inference (ML) and Multiple Regression
Q: Is BOH stock a buy or sell?
A: The dominant strategy among neural network is to Hold BOH Stock.
Q: Is Bank of Hawaii stock a good investment?
A: The consensus rating for Bank of Hawaii is Hold and assigned short-term Ba2 & long-term B2 forecasted stock rating.
Q: What is the consensus rating of BOH stock?
A: The consensus rating for BOH is Hold.
Q: What is the prediction period for BOH stock?
A: The prediction period for BOH is (n+6 month)

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